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    Chapter 3

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    Lyssa
    The document discusses the roles and responsibilities of audit committees, including selecting external auditors, discussing earnings reports and guidance, and ensuring auditor independence. It also covers requirements for board composition, including a minimum of three independent directors or one-third of the board being independent. The board must hold regular executive sessions without management present, and have committees like corporate governance and audit that are composed of at least three independent directors and have written charters outlining their purpose and responsibilities with annual performance evaluations.

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    Chapter 3

    Uploaded by

    Lyssa
    166 views3 pages
    The document discusses the roles and responsibilities of audit committees, including selecting external auditors, discussing earnings reports and guidance, and ensuring auditor independence. It also covers requirements for board composition, including a minimum of three independent directors or one-third of the board being independent. The board must hold regular executive sessions without management present, and have committees like corporate governance and audit that are composed of at least three independent directors and have written charters outlining their purpose and responsibilities with annual performance evaluations.

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    CHAPTER 3

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    The document discusses the roles and responsibilities of audit committees, including selecting external auditors, discussing earnings reports and guidance, and ensuring auditor independence. It also covers requirements for board composition, including a minimum of three independent directors or one-third of the board being independent. The board must hold regular executive sessions without management present, and have committees like corporate governance and audit that are composed of at least three independent directors and have written charters outlining their purpose and responsibilities with annual performance evaluations.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    166 views3 pages

    Chapter 3

    Uploaded by

    Lyssa
    The document discusses the roles and responsibilities of audit committees, including selecting external auditors, discussing earnings reports and guidance, and ensuring auditor independence. It also covers requirements for board composition, including a minimum of three independent directors or one-third of the board being independent. The board must hold regular executive sessions without management present, and have committees like corporate governance and audit that are composed of at least three independent directors and have written charters outlining their purpose and responsibilities with annual performance evaluations.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    CHAPTER 3

    MULTIPLE CHOICE QUESTIONS


    1. Audit committee activities and responsibilities include which of the following?
     A. Selecting the external audit firm.

    2. Which of the following audit committee responsibilities has the SEC mandated?
     B. Discussing in its meetings the company's earnings press releases, as well as
    financial information and earnings guidance provided to analysts.

    EXERCISE 1
    a. Boards need to consist of at least 3 independent directors or 1/3 of the board which is
    higher.
     The Boards need to have at least 3 independent directors in order to ensure the
    exercise of independent judgement on corporate affairs and proper oversight of
    managerial performance, including prevention of conflict of interests and
    balancing of competing demands of the corporation. Also, experts have
    recognized that there are varying opinion on the optimal number of independent
    directors in the, however the ideal number ranges is from one-third (1/3) to a
    substantial majority.

    b. Boards need to hold regular executive sessions of independent directors without


    management presents.
     The Independent Directors may also meet periodically in an executive session
    with no other Director or management present except for the Chairman of the
    Board Corporate Governance Committee who shall call for and preside the
    meeting. 

    c. Boards must have a / corporate governance committee composed of at least 3


    independent directors.
     The Corporate Governance Committee shall be composed of at least three (3)
    members of the Board of Directors, two of whom shall be independent directors,
    including the chairperson.

    d. The corporate governance committee must have a written charter that addresses the
    committee’s purpose and responsibilities, and there must be annual performance
    evaluation of the committee.
     The committee must have a written charter to clearly define the roles and
    accountabilities of each committee to avoid any overlapping functions, which
    aims at having a more effective board for the company. This can also be used as
    basis for the assessment of committee performance.

    e. Boards must have an audit committee with a minimum of three independent members.
     The audit committee shall consist of a minimum of 3 directors with independent
    directors forming a majority. The majority of members of Audit Committee
    including its Chairperson shall be persons with ability to read and understand, the
    financial statement

    f. The audit committee must have a written charter that addresses the committee’s purpose
    and responsibilities, and the committee must produce an audit committee; there must also
    be an annual performance evaluation of the committee.
     The audit committee should be required to have a written charter that address the
    respective purposes, memberships, structures, operations, reporting processes,
    resources and other relevant information. The charters means to provide the
    standards for evaluating the performances of the committees.

    EXERCISE 2
    a. Obtaining each year a report by the external auditor that addresses the company’s internal
    control procedures, any quality control or regulatory problems, and any relationships that
    might threaten the independence of the external auditor
     The external auditor addresses that the company’s internal control procedures
    helps to address the risk of fraud in publicly traded organizations in order to
    regulate the problems and it might threaten the independence, it done with the
    potential conflict of interests.

    b. Discussing the company’s financial statements with management and the external auditor
     The risk of fraud in publicly traded organizations discusses the financial
    statements with the management and the external auditor to have the assurance if
    the financial information stated are correct or unbiased and helps to facilitate
    compliance with applicable laws.

    c. Discussing in its meetings the company’s earnings press releases, as well as financial
    information and earnings guidance provided to analysts
     The company’s earnings press releases and other financial information provides
    analysis in the given financial information regarding on the company’s earnings.
    It shows the results of financial and the performance of the company.

    d. Discussing in its meetings policies with respect to risk assessment and risk management
     This meetings policies to risk assessment and risk management will affects the
    profitability of the company and set up the procedures in regards to avoid the risk
    or to minimize the impact on the organization.

    e. Meeting separately with management, internal auditors, and the external auditors on a
    periodic basis
     This meeting serves to ensure that the management and others will disclose the
    financial reports to correct the financial information and find the significant
    findings or results that has an impact to the company.

    f. Reviewing with the external auditors any audit problems are difficulties that they had
    with management
     This statement are concerns in the audit problems that they had with the
    management. The issues is regarding to the cooperation with the rules and
    regulations and to ensure that there will be a conflicts in the company.

    g. Setting clear hiring policies for employees or for former employees of the external
    auditor
     Requires that the audit committee set clear policies with respect to hiring partners
    or employees or former partners or employees of the company’s independent
    accounting firm.

    h. Reporting regularly to the board of directors


     The boards of directors are required to report regularly about the company in any
    dealings in the company’s shares within three business days in order to reduce the
    risk that the directors might take advantage of the information and it emphasized
    that the policy is on internal disclosure to the company of any dealing by the
    directors.

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